Household incomes in the UK will stagnate over the next two years as the impact of the financial crisis continues to be felt, a report has warned.

The Institute for Fiscal Studies (IFS) also predicts that in five years' time, typical household income will be just 4% higher than it is now as households suffer the worst income squeeze for 60 years.

The IFS projections are based on the latest Office for Budget Responsibility (OBR)’s forecast for average earnings.

The report, funded by the Joseph Rowntree Foundation, said that median household income in 2021–22 will be 18% lower – or more than £5,000 lower - than might reasonably have been before the 2008 crash.

“This sustained slowdown in income growth is unprecedented in at least the last 60 years,” it said.

The report said that pensioner incomes will continue to grow faster than those of the rest of the population, while low-income households with children are likely to fare worst.

The research uses data on household incomes from the Family Resources Survey, together with OBR macroeconomic forecasts and announced changes in tax and benefit policy, to project household incomes up to 2021–22.

Tom Waters, an author of the report and a Research Economist at IFS, said: “If the OBR’s forecast for earnings growth is correct, average incomes will not increase at all over the next two years.

''Even if earnings do much better than expected over the next few years, the long shadow cast by the financial crisis will not have receded.”